Passenger Trains > Amtrak Payments to Freight Railroads

Hi guys,

I know this whole concept has been discussed ad-nauseum on here, but could somebody give me a link to the actual figures somewhere as to how much Amtrak pays the freight Class 1's for the right to access their tracks?

This relates to a discussion I'm having at work with a coworker of mine, and trying to counter his arguement that the freight railroads would not be profitable without government subsidization. I know this is 100% NOT true, but the annual reports (both Amtrak's and, in my case, Norfolk Southern's) don't break the data down that far.

We're both professionals at an investment management company, so links to reputable sources of some sort would be very preferable (no blogs and the like). The discussion is informal though...

One last note - no political posts or opinions please!

Thank you all!!


EDIT: Yes, I know federal, state, and local governments frequently provide support for capital projects that they believe to be a beneficial impact for the affected communities at large, but I'm focusing on Amtrak payments for now as they are the only CONSISTENT cash stream that, indirectly, comes from the public.



Edited 4 time(s). Last edit at 11/08/12 08:03 by chs7-321.

Several years ago, someone posted a very interesting spreadsheet listing total payments by Amtrak to the freight railroads. It's a bit out of date now, I'm sure, but then I doubt the amounts have changed greatly. In round terms, the freight railroads collect about $100 million annually from Amtrak to host Amtrak's trains.

To put that amount in its place, the freight rail industry now grosses about $60 billion a year, so Amtrak payments are rather small beer.

Freight railroads are most definitely profitable. They generate most of their investment capital from freight rates they charge shippers (very recently, there have been some mostly small investments paid for by states and the Federal government). Total annual railroad investment in facilities and equipment (locomotives and cars) has run in the range of $12 billion in the last several years. About a decade ago, I undertook a project (as a consultant) to estimate the investment needed to maintain the railroad network in its present condition and came up with about an $8 billion annual investment. At the time the industry was investing a bit less than that, so my client (an industry trade association) buried the report. But now, investment is substantially more than the minimum required -- and the industry is earning record profits!

So please tell your co-worker that, no, railroads aren't subsidized by anyone to any significant degree, and may be the only transportation mode that actually covers its own costs. Oh, and did I mention that railroads pay taxes on their property?

chs7-321 Wrote:
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> One last note - no political posts or opinions please!

=======================================

DARN! Spoiled all the fun! <G>

• Seventy-two percent of the miles traveled by Amtrak trains are on tracks owned
by other railroads. Known as “host railroads,” they range from large publicly
traded companies based in the U.S. or Canada, to state and local government
agencies and small businesses. Amtrak pays these host railroads for use of their
track and other resources required to operate Amtrak trains, with incentives for
on-time dispatching. Those payments were for nearly 26 million train miles (one
train mile = a mile of track usage by each train) in FY 2011 and totaled more
than $124 million.
The six largest host railroads for Amtrak trains are:
○ BNSF Railway, 6.5 million train miles
○ Union Pacific Railroad, 6.0 million train miles
○ CSX Transportation, 5.9 million train miles
○ Norfolk Southern Railway, 2.5 million train miles
○ Canadian National Railway, 1.4 million train miles
○ Metro North Railroad, 1.3 million train miles
http://www.amtrak.com/ccurl/358/145/Amtrak-National-Fact-Sheet-FY2011-Final-v2.pdf



Edited 1 time(s). Last edit at 11/08/12 08:47 by 466lex.

I wonder why the freight railroads just won't take over Amtrak together and run the system as is(no cuts to salary or benefits) or bigger as a tax write off since they are making so much money these days. I mean 1 billion a year is nothing to 6 class one railroads and maybe even more routes like the old days. Remember, this is only a dream.

zzzzz Wrote:
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> I wonder why the freight railroads just won't take
> over Amtrak together and run the system as is(no
> cuts to salary or benefits) or bigger as a tax
> write off since they are making so much money
> these days. I mean 1 billion a year is nothing to
> 6 class one railroads and maybe even more routes
> like the old days. Remember, this is only a dream.

You could do this by paying them a tax credit for the effort. That was one of the original concepts for Amtrak.

zzzzz Wrote:
-------------------------------------------------------
> I wonder why the freight railroads just won't take
> over Amtrak together and run the system as is(no
> cuts to salary or benefits) or bigger as a tax
> write off since they are making so much money
> these days. I mean 1 billion a year is nothing to
> 6 class one railroads and maybe even more routes
> like the old days. Remember, this is only a dream.


There is no way that would be allowed without the Feds still having a say in it,
and that would be anathema.

In your "dream" analogy, a nightmare.

There is also that pesky Northeast Corridor, which does not figure into the freight
railroad compensation issue. It loses money (Amtrak's claims of its economic performance
are specious, no real railroad would ignore infrastructure costs) and I doubt the freight
railroads would want to take THAT on.

-GP

zzzzz Wrote:
-------------------------------------------------------
> I wonder why the freight railroads just won't take
> over Amtrak together and run the system as is(no
> cuts to salary or benefits) or bigger as a tax
> write off since they are making so much money
> these days. I mean 1 billion a year is nothing to
> 6 class one railroads and maybe even more routes
> like the old days. Remember, this is only a dream.

You'd likely have some dysfunction in the labor agreements on lines where the freight crews are paid by a combination of hours and districts, while Amtrak engineers are paid on a different scale and over a much longer single run.

If these jobs paid similar money, which job do you think a conductor would choose?

--Be available for next out, which might be an hour or 12 hours away. We know, but we won't tell you. Once aboard, be prepared to walk back 3/4 of a mile carrying a 40 pound knuckle, a large wrench, and a flashlight. In the dark. In the rain. On uneven ballast. And, then walk back so the DS can holler at you for taking so long.

--Have a scheduled job, and know about how long you have to wait for your train back to home terminal. Wear a suit to work. Have an AC to go back and flag the train in the rain, etc. Have a well lighted office, maybe in the diner with friendly stewards bringing you fresh coffee and rolls. Deal with pleasant and well mannered customers (OK I made that one up).


I know which one I'd take if they paid even remotely similar money...

zzzzz Wrote:
-------------------------------------------------------
> I wonder why the freight railroads just won't take
> over Amtrak together and run the system as is(no
> cuts to salary or benefits) or bigger as a tax
> write off since they are making so much money
> these days. I mean 1 billion a year is nothing to
> 6 class one railroads and maybe even more routes
> like the old days. Remember, this is only a dream.

For the simple reason of "been there, done that, and lost lots of money". If hauling passengers was a profitable enterprise, the railroads would still be engaged in the activity. The profitability is not just a question of labor costs and infrastructure expense but also the competition from cars and planes.

Christo Wrote:
-------------------------------------------------------
> zzzzz Wrote:
> --------------------------------------------------
> -----
> > I wonder why the freight railroads just won't
> take
> > over Amtrak together and run the system as
> is(no
> > cuts to salary or benefits) or bigger as a tax
> > write off since they are making so much money
> > these days. I mean 1 billion a year is nothing
> to
> > 6 class one railroads and maybe even more
> routes
> > like the old days. Remember, this is only a
> dream.
>
> For the simple reason of "been there, done that,
> and lost lots of money". If hauling passengers
> was a profitable enterprise, the railroads would
> still be engaged in the activity. The
> profitability is not just a question of labor
> costs and infrastructure expense but also the
> competition from cars and planes.


Passengers also complain a lot more than intermodal freight or coal shipments, too. CEOs don't need that hassle.

Not mentioned yet is Insurance liability.

You might like to review this former Mad Dog Chronicle and the next four or five.
http://www.trainorders.com/discussion/read.php?18,1724812

Indemnification. Perhaps even a better perk than track usage payments.

CSX improperly maintains a switch, Amtrak crashes and kills 4. Amtrak pays $64 million, CSX pays zero...except $20,000 fine.
Ricky Gates and Conrail crashes into Amtrak at Chase on NEC. Amtrak pays $9.3 million in compensatory damage...Conrail pays 0.
UP signal maintainer fails to hook up grade crossings signals. Amtrak trains kills 2 teens and pays $4M UP pays 0.

It's the law. Freight railroads are not responsible no matter what the cause.

http://www.nytimes.com/2004/10/15/national/15rail.html?pagewanted=print&amp;position=&amp;_r=0

You do have to keep in mind the insurance/indemnification arrangements the host railroad freights have with Amtrak. The freights are willing to negotiate relatively low "incremental/avoidable" cost payments from Amtrak as long as Amtrak continues to agree to indemnify the freights against any passenger death or injury claims due to an accident (train on train, derailment) even if the host railroad freight is found to be at fault. If that arrangement were not in place, the rates Amtrak pays the freights would be much higher (incidentally, Amtrak considers payments to any individual host railroad to be proprietary info). How much this current arrangement adds to Amtrak's annual operating liability insurance premiums is an interesting question. I'm most familiar with the Amtrak/BNSF insurance language, but I believe the other host railroads have the same language. So in reality, it costs Amtrak much more than the annual incremental maintenance/incentive train mile fee payments to operate over the host railroad (especially when something bad happens).

Phurg Wrote:
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> (incidentally, Amtrak
> considers payments to any individual host railroad
> to be proprietary info).

A "Freedom of Information" request will get that info - it's OUR (taxpayer) money!

Not sure if it is a standard rate or not, but Amtrak pays a commuter railroad in the south west $1/ mile for operating and mantenance costs, and $1.50/mile to maintian signals and ATS. Since that contract used the BNSF contract for a pattern, I suspect BNSF is collecting a similar rate. This does not include incentive payments, which can be depleated , and the host railroad can actually end up paying Amtrak. Honestly, I have seen the incintive maximum, and I dont beleive they are worth it. I beleive it is entirely plausable for a host railroad to run up higher expences in fuel burn, re-crew and decreased velocity in pursuit of easy money from Amtrak. It really is kind of an insane arrangement.

Go to this Amtrak link and see the PRIIA reports for several LDT's
that breaks out fees paid to host railroads (FY 2010).

http://www.amtrak.com/servlet/ContentServer?c=Page&amp;pagename=am%2FLayout&amp;cid=1241245669222

I asked this question also and got a lot of answers and did a lot of research of my own. But as a general rule if you are just doing 'ball park'type estimates use $5 a train mile. Of course these contracts are confidential and much more complex than that as they are based on a number of factors such as length of the train, on time and schedule requirements, maintenance standards for the track vs what they would normally do for freight trains only and on and on like that. But if you narrow it down and study some of the Amtrak reports it averages around the $5 per train mile number. But that is only for the once or twice a day service on freight railroad tracks. Anything more complex and you are on your own.